SUBADVISORY AGREEMENT
THIS AGREEMENT is made by and among AETNA LIFE INSURANCE AND ANNUITY COMPANY, a
Connecticut insurance corporation (the "Adviser"), AETNA INCOME SHARES, a
Massachusetts Business Trust (the "Fund") and AELTUS INVESTMENT MANAGEMENT,
INC., a Connecticut corporation (the "Subadviser") as of the date set forth
below.
W I T N E S S E T H
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WHEREAS, the Fund is registered with the Securities and Exchange Commission (the
"Commission") as an open-end, diversified, management investment company, under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, both the Adviser and the Subadviser are registered with the Commission
as investment advisers under the Investment Advisers Act of 1940, as amended
(the "Advisers Act") and both are in the business of acting as investment
advisers; and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement with the
Fund (the "Investment Advisory Agreement") which appoints the Adviser as the
investment adviser for the Fund; and
WHEREAS, Article IV of the Investment Advisory Agreement authorizes the Adviser
to delegate all or a portion of its obligations under the Investment Advisory
Agreement to a subadviser;
NOW THEREFORE, the parties agree as follows:
I. APPOINTMENT AND OBLIGATIONS OF THE ADVISER
Subject to the terms and conditions of this Agreement the Adviser and the Fund
hereby appoint the Subadviser to manage the assets of the Fund as set forth
below in Section II, under the supervision of the Adviser and subject to the
approval and direction of the Fund's Board of Trustees (the "Board"). The
Subadviser hereby accepts such appointment and agrees that it shall, for all
purposes herein, undertake such obligations as an independent contractor and not
as an agent of the Adviser. The Subadviser agrees, that except as required to
carry out its duties under this Agreement or otherwise expressly authorized, it
has no authority to act for or represent the Fund in any way.
II. DUTIES OF THE SUBADVISER AND THE ADVISER
A. Duties of the Subadviser
The Subadviser shall regularly provide investment advice with respect
to the assets held by the Fund and shall continuously supervise the
investment and reinvestment of cash, securities and instruments or
other property comprising the assets of the Fund. In carrying out these
duties, the Subadviser shall:
1. select the securities to be purchased, sold or exchanged by
the Fund or otherwise represented in the Fund's investment
portfolio, place trades for all such securities and
regularly report thereon to the Adviser and, at the request
of the Adviser, to the Board;
2. formulate and implement continuing programs for the
purchase and sale of securities and regularly report
thereon to the Adviser and, at the request of the Adviser
or the Fund, to the Board;
3. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the
economy generally, the Fund, securities held by or under
consideration for the Fund, or the issuers of those
securities;
4. provide economic research and securities analyses as
requested by the Adviser from time to time, or as the
Adviser considers necessary or advisable in connection with
the Subadviser's performance of its duties hereunder; and
5. give instructions to the custodian and/or sub-custodian of
the Fund appointed by the Board, concerning deliveries of
securities, transfers of currencies and payments of cash
for the Fund, as required to carry out the investment
activities of the Fund as contemplated by this Agreement;
and
6. provide such financial support, administrative and other
services, such as preparation of financial data,
determination of the Fund's net asset value, preparation of
financial and performance reports, as the Adviser from time
to time, deems necessary and appropriate and which the
Subadviser is willing and able to provide.
B. Duties of the Adviser
The Adviser shall retain responsibility for oversight of all activities
of the Subadviser and for monitoring its activities on behalf of the
Fund. In carrying out its obligations under this Agreement and the
Investment Advisory Agreement, the Adviser shall:
1. monitor the investment program maintained by the Subadviser
for the Fund and the Subadviser's compliance program to
ensure that the Fund's assets are invested in compliance
with the Subadvisory Agreement and the Fund's investment
objectives and policies as adopted by the Board and
described in the most current effective amendment of the
registration statement for the Fund, as filed with the
Commission under the Securities Act of 1933, as amended
(the "1933 Act"), and the 1940 Act ("Registration
Statement");
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2. review all data and financial reports prepared by the
Subadviser to assure that they are in compliance with
applicable requirements and meet the provisions of
applicable laws and regulations;
3. file all periodic reports required to be filed by the Fund
with the applicable regulatory authorities;
4. review and deliver to the Board all financial, performance
and other reports prepared by the Subadviser under the
provisions of this Agreement or as requested by the
Adviser;
5. establish and maintain regular communications with the
Subadviser to share information it obtains concerning the
effect of developments and data on the investment program
maintained by the Subadviser;
6. maintain contact with and enter into arrangements with the
custodian, transfer agent, auditors, outside counsel, and
other third parties providing services to the Fund;
7. oversee all matters relating to (i) the offer and sale of
shares of the Fund, including promotions, marketing
materials, preparation of prospectuses, filings with the
Commission and state securities regulators, and
negotiations with broker-dealers; (ii) shareholder
services, including, confirmations, correspondence and
reporting to shareholders; (iii) all corporate matters on
behalf of the Fund, including monitoring the corporate
records of the Fund, maintaining contact with the Board,
preparing for, organizing and attending meetings of the
Board and the Fund's shareholders; (iv) preparation of
proxies when required; and (v) any other matters not
expressly delegated to the Subadviser by this Agreement.
III. REPRESENTATIONS AND WARRANTIES
A. Representations and Warranties of the Subadviser
The Subadviser hereby represents and warrants to the Adviser as
follows:
1. Due Incorporation and Organization. The Subadviser is duly
organized and is in good standing under the laws of the
State of Connecticut and is fully authorized to enter into
this Agreement and carry out its duties and obligations
hereunder.
2. Registration. The Subadviser is registered as an investment
adviser with the Commission under the Advisers Act, and is
registered or licensed as an investment adviser under all
of the laws of all jurisdictions in which its activities
require it to be so registered or licensed. The Subadviser
shall maintain such registration or license in effect at
all times during the term of this Agreement.
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3. Regulatory Orders. The Subadviser is not subject to any
stop orders, injunctions or other orders of any regulatory
authority affecting its ability to carry out the terms of
this Agreement. The Subadviser will notify the Adviser and
the Fund immediately if any such order is issued or if any
proceeding is commenced that could result in such an order.
4. Compliance. The Subadviser has in place compliance systems
and procedures designed to meet the requirements of the
Advisers Act and the 1940 Act and it shall at all times
assure that its activities in connection with managing the
Fund follow these procedures.
5. Authority. The Subadviser is authorized to enter into this
Agreement and carry out the terms hereunder.
6. Best Efforts. The Subadviser at all times shall provide its
best judgment and effort to the Fund in carrying out its
obligations hereunder.
B. Representations and Warranties of the Adviser
The Adviser hereby represents and warrants to the Subadviser as
follows:
1. Due Incorporation and Organization. The Adviser is duly
organized and is in good standing under the laws of the
State of Connecticut and is fully authorized to enter into
this Agreement and carry out its duties and obligations
hereunder.
2. Registration. The Adviser is registered as an investment
adviser with the Commission under the Advisers Act, and is
registered or licensed as an investment adviser under all
of the laws of all jurisdictions in which its activities
require it to be so registered or licensed. The Adviser
shall maintain such registration or license in effect at
all times during the term of this Agreement.
3. Regulatory Orders. The Adviser is not subject to any stop
orders, injunctions or other orders of any regulatory
authority affecting its ability to carry out the terms of
this Agreement. The Adviser will notify the Subadviser and
the Fund immediately if any such order is issued or if any
proceeding is commenced that could result in such an order.
4. Authority. The Adviser is authorized to enter into this
Agreement and carry out the terms hereunder.
5. Best Efforts. The Adviser at all times shall provide its
best judgment and effort to the Fund in carrying out its
obligations hereunder.
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C. Representations and Warranties of the Fund
The Fund hereby represents and warrants to the Adviser as follows:
1. Due Incorporation and Organization. The Fund has been duly
formed as a business trust under the laws of the
Commonwealth of Massachusetts and it is authorized to enter
into this Agreement and carry out its obligations
hereunder.
2. Registration. The Fund is registered as an investment
company with the Commission under the 1940 Act and shares
of the Fund are registered for offer and sale to the public
under the 1933 Act and all applicable state securities
laws. Such registrations will be kept in effect during the
term of this Agreement.
IV. BROKER-DEALER RELATIONSHIPS
A. Portfolio Trades
The Subadviser shall place all orders for the purchase and sale of
portfolio securities for the Fund with brokers or dealers selected by
the Subadviser, which may include brokers or dealers affiliated with
the Subadviser. The Subadviser shall use its best efforts to seek to
execute portfolio transactions at prices that are advantageous to the
Fund giving consideration to the services and research provided and at
commission rates that are reasonable in relation to the benefits
received.
B. Selection of Broker-Dealers
In selecting broker-dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Fund and/or the
other accounts over which the Subadviser or its affiliates exercise
investment discretion. The Subadviser may also select brokers or
dealers to effect transactions for the Fund who provide payment for
expenses of the Fund. The Subadviser is authorized to pay a broker or
dealer who provides such brokerage and research services or expenses, a
commission for executing a portfolio transaction for the Fund that is
in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction if the Subadviser
determines in good faith that such amount of commission is reasonable
in relation to the value of the brokerage, research and other services
provided by such broker or dealer and is paid in compliance with
Section 28(e) or other rules and regulations of the Commission. This
determination may be viewed in terms of either that particular
transaction or the overall responsibilities that the Subadviser and its
affiliates have with respect to accounts over which they exercise
investment discretion. The Board shall periodically review the
commissions paid by the Fund to determine if the commissions paid over
representative periods of time were reasonable in relation to the
benefits received.
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V. CONTROL BY THE BOARD OF TRUSTEES
Any investment program undertaken by the Subadviser pursuant to this Agreement,
as well as any other activities undertaken by the Subadviser at the direction of
the Adviser with respect to the Fund, shall at all times be subject to any
directives of the Board.
VI. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, the Subadviser shall at
all times conform to:
1. all applicable provisions of the 1940 Act, the Advisers Act
and any rules and regulations adopted thereunder;
2. all policies and procedures of the Fund as adopted by the
Board and as described in the Registration Statement;
3. the provisions of the Declaration of Trust of the Fund, as
amended from time to time;
4. the provisions of the Bylaws of the Fund, as amended from
time to time; and
5. any other applicable provisions of state or federal law.
VII. COMPENSATION
A. Payment Schedule
The Adviser shall pay the Subadviser, as compensation for services
rendered hereunder, from its own assets, an annual fee of up to .25% of
the average daily net assets in the Fund, payable monthly. Except as
hereinafter set forth, compensation under this Agreement shall be
calculated and accrued daily at the rate of 1/365 of the annual
Subadvisory fee of up to .25% applied to the daily net assets of the
Fund. If this Agreement becomes effective subsequent to the first day
of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the
fees set forth above.
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B. Reduction
Payment of the Subadviser's compensation for the preceding month shall
be made as promptly as possible, except as provided below. The
Subadviser acknowledges that, pursuant to the Investment Advisory
Agreement, the Adviser has agreed to reduce its fee or reimburse the
Fund if the expenses borne by the Fund exceed the expense limitations
applicable to the Fund imposed by the securities laws or regulations of
any jurisdiction in which the Fund shares are qualified for sale.
Accordingly, the Subadviser agrees that, if, for any fiscal year, the
total of all ordinary business expenses of the Fund, including all
investment advisory fees but excluding brokerage commissions,
distribution fees, taxes, interest, extraordinary expenses and certain
other excludable expenses, would exceed the most restrictive expense
limits imposed by any statute or regulatory authority of any
jurisdiction in which shares of the Fund are offered for sale (unless a
waiver is obtained), the Subadviser shall reduce its advisory fee to
the extent necessary to meet such expense limit, but will not be
required to reimburse the Fund for any ordinary business expenses which
exceed the amount of its advisory fee for the fiscal year. The
Subadviser shall contribute to the amount of such reduction by
reimbursing the Adviser in proportion to the amounts which the Adviser
and Subadviser would have been entitled to receive for such year. For
the purposes of this paragraph, the term "fiscal year" shall exclude
the portion of the current fiscal year which elapsed prior to the
effective date of this Agreement, but shall include the portion of the
then current fiscal year has elapsed at the date of termination of this
Agreement.
VIII. ALLOCATION OF EXPENSES
The Subadviser shall pay the salaries, employment benefits and other related
costs of those of its personnel engaged in providing investment advice to the
Fund hereunder, including, but not limited to, office space, office equipment,
telephone and postage costs. In the event the Subadviser incurs any expense that
is the obligation of the Adviser as set out in this Agreement, the Adviser shall
reimburse the Subadviser for such expense on presentation of a statement
indicating the expenses incurred and the amount paid by the Subadviser.
IX. NONEXCLUSIVITY
The services of the Subadviser with respect to the Fund are not to be deemed to
be exclusive, and the Subadviser shall be free to render investment advisory and
administrative or other services to others (including other investment
companies) and to engage in other activities. It is understood and agreed that
officers or directors of the Subadviser may serve as officers or directors of
the Adviser or officers or trustees of the Fund; that officers or directors of
the Adviser or officers or trustees of the Fund may serve as officers or
directors of the Subadviser to the extent permitted by law; and that the
officers and directors of the Subadviser are not prohibited from engaging in any
other business activity or from rendering services to any other person, or from
serving as partners, officers, directors or trustees of any other firm or trust,
including other investment advisory companies.
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X. TERM
This Agreement shall become effective at the close of business on July 31, 1996,
and shall remain in force and effect through December 31, 1997, unless earlier
terminated under the provisions of Article XI. Following the expiration of its
initial term, the Agreement shall continue in force and effect for one year
periods, provided such continuance is specifically approved at least annually:
1 (a) by the Fund's trustees or (b) by the vote of a majority
of the Fund's outstanding voting securities (as defined in
Section 2(a)(42) of the 1940 Act), and
2. by the affirmative vote of a majority of the trustees who
are not parties to this Agreement or interested persons of
a party to this Agreement (other than as a trustee of the
Fund), by votes cast in person at a meeting specifically
called for such purpose.
XI. TERMINATION
This Agreement may be terminated:
1. at any time, without the payment of any penalty, by vote of
the Fund's trustees or by vote of a majority of the
outstanding voting securities of the Fund; or
2. by the Adviser, the Fund or the Subadviser on sixty (60)
days' written notice to the other party, unless written
notice is waived by the party required to be notified; or
3. automatically in the event there is an "assignment" of this
Agreement, as defined in Section 2 (a) (4) of the 1940 Act.
XII. LIABILITY
A. Liability of the Subadviser
The Subadviser shall be liable to the Fund and the Adviser and shall
indemnify the Fund and the Adviser for any losses incurred by the Fund,
or the Adviser whether in the purchase, holding or sale of any security
or otherwise, to the extent that such losses resulted from an act or
omission on the part of the Subadviser or its officers, directors or
employees, that is found to involve willful misfeasance, bad faith or
negligence, or reckless disregard by the Subadviser of its duties under
this Agreement, in connection with the services rendered by the
Subadviser hereunder.
B. Liability of the Fund, the Shareholders and the Trustees
A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed on behalf of the trustees of the
Fund as trustees and not individually and that the
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obligations of this instrument are not binding upon any of the
trustees or shareholders individually but are binding only upon the
assets and property of the Fund. No provision of this Agreement shall
be construed to protect any trustee or officer of the Fund or director
or officer of the Adviser, from liability in violation of Section 17(h)
and (i) of the 1940 Act.
XIII. NOTICES
Any notices under this Agreement shall be in writing, addressed and delivered,
mailed postage paid, or sent by other delivery service, or by facsimile
transmission to each party at such address as each party may designate for the
receipt of notice. Until further notice, such address shall be:
if to the Fund or the Adviser:
000 Xxxxxxxxxx Xxxxxx, XX0X
Xxxxxxxx, Xxxxxxxxxxx 00000
Fax number: 860/000-0000
Attn: Secretary
if to the Subadviser:
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Fax number: 860/000-0000
Attention: President
XIV. QUESTIONS OF INTERPRETATION
This Agreement shall be governed by the laws of the State of Connecticut. Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or, in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Commission issued pursuant to the 1940 Act. In addition, where the effect
of a requirement of the 1940 Act reflected in any provision of the Agreement is
revised by rule, regulation or order of the Commission, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
XV. SERVICE XXXX
The service xxxx of the Fund and Adviser, and the name "Aetna" have been adopted
by the Fund with the permission of Aetna Life and Casualty Company and their
continued use is subject to the right of Aetna Life and Casualty Company to
withdraw this permission in the event the Subadviser or another subsidiary or
affiliated corporation of Aetna Life and Casualty Company should not be the
investment adviser of the Fund.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers on the 1st day of August, 1996.
Aetna Life Insurance and Annuity Company
By: /s/ Xxxxx X. Xxxxxxx
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Attest: Name: Xxxxx X. Xxxxxxx
Title: Vice President
/s/ XxXxx X. Xxxxxxxxx
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XxXxx X. Xxxxxxxxx
Assistant Corporate Secretary
Aeltus Investment Management, Inc.
Attest: By: /s/ Xxxx X. Xxx
--------------------------------
Name: Xxxx X. Xxx
Title: President
/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
Assistant Secretary
Aetna Income Shares
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxx
Attest: Title: President
/s/ Xxxxx X. Xxxxxx
----------------------------
Xxxxx X. Xxxxxx
Secretary
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